building a sustainable supply chain ikea case study

BUILDING A SUSTAINABLE SUPPLY CHAINIKEA CASE STUDY

Jakarta, November 2015

Firdaus Albarqoni 122140058

[email protected] Universitas Trisakti

MAGISTER MANAJEMENUNIVERSITAS TRISAKTI

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PRESENTATION OUTLINE• INTRODUCTION

About IKEA IKEA VISION

• SECTORS OF INDUSTRY AND SUSTAINABLE SUPPLY CHAINS Sector of Industry Supply Chain Environmental Considerations

• THE PRIMARY SECTOR Design Stage Raw material Supplies Environmental Impact Supplier Codes of Product

• THE SECONDARY SECTOR Manufacturing Sustainable Partnership

• THE TERTIARY SECTOR AND CONCLUSION Other Business Retailing Sustainable Activities

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INTRODUCTION

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ABOUT IKEA

IKEA undergoes raid expansion in 1970s. First store opened outside Scandinavia in Switzerland. More followed in subsequent years in Germany, Australia, Austria, Canada, and Netherland.

Store opened in Russia and Japan. By reducing use of other transport methods such as large trucks, IKEA has lowered it carbon dioxide emmisions.

The founder of IKEA, Ingvar Kampard was born

IKEA was founded by Ingvar Kampard aged 17 in a small farming village in Sweden. The name IKEA was farmed from the founder initial (I.K) plus the first letter of Elmtaryd and Agunnaryd, the farm and village where he grew up. Originally IKEA sold everything from pens and wallets to pictures frame, watches and even ladies stocking.

Production of the first IKEA catalouge in 1951 and the first IKEA advertisements appear in local newspapers. Ingvar distributed his product via the county milk van, which delivered them to the nearby train station. Introduction of flat packaging. In the late 1950s Ingvar decided top stop selling everything except furniture items-IKEA as we know it today was born. The first IKEA store opened in Almhut, Sweden.

First IKEA stores opened outside Sweden in Norway and Denmark

1920s

1940s

1950s

1970s

2000s

1960s

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IKEA VISION

To create a better everyday life for the many people

Well-Designed

Well-Functional

Low-Price

many people can afford to buy the product

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SECTORS OF INDUSTRY AND SUSTAINABLE SUPPLY CHAINS

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SECTOR OF INDUSTRY SUPPLY CHAIN

Raw Material Manufacturing Distribution Retailer Consumer

Primary Sector

Extract or develops natural resources such

as timber, agriculture, oil

or mineral

Secondary Sector

Make use of extracted primary materials to build,

manufacture or develop finished

goods.

Tertiary Sector

Provide the services needed to meet the needs

of the end users, for example through retailing,

distribution, insurance, and customer services

The supply chain involves a flow of production and processes through each of the three industrial sectors.

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ENVIRONMENTAL CONSIDERATIONS

IKEA takes its responsibilities seriously and organizes its operations in order to have a positive effect upon the environment:• It aims that all the products and materials it takes from the

primary sector do not harm the environment.• Its products are manufactured in a responsible way.

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THE PRIMARY SECTOR


Primary Sector



or mineral

Secondary Sector



goods.

Tertiary Sector




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DESIGN STAGE• IKEA is not a primary sector organization but it needs raw materials to

develop its products.• It therefore works closely with primary sector suppliers to ensure a

sustainable impact on the people and the environment in which it operates.

• Low price is one of the main factors that IKEA considers in producing well designed, functional home furnishings available to everyone

• The primary sector involves the development of the raw materials

Design

Creating design of product

Quality ControlChecking that products meet

strict requirements for

function

Distribution

Distributing raw material into

manufacturing sector

Design Stage

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RAW MATERIAL SUPPLIES

Supplier

Supplier

Supplier

Supplier

IKEA

IKEA buys products from more than 1,300 suppliers in 50 countries. It uses a number of trading service offices across the world. They negotiate prices with suppliers, check the quality of materials and analyse the environmental impacts that occur through the supply chain. They also keep an eye on social and working conditions at suppliers

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ENVIRONMENTAL IMPACT

• KEA uses a tool - the 'e-Wheel' - to evaluate the environmental impact of its products. The e-Wheel helps IKEA to analiza the four stages within the life of a product. This also helps suppliers improve their understanding of the environmental impact of the products they are supplying.

• Approximately 50% of IKEA's 9,500 products are made from wood or wood fibers. This is a good resource as long as it comes from sustainable sources. It can be recycled and is a renewable resource.

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SUPPLIER CODES OF CONDUCT

• IKEA specifies to its producers that waste should be avoided. Where waste does occur IKEA encourages suppliers to try to use it in the manufacture of other products. IKEA has a code of conduct called the IKEA Way of Purchasing Home Furnishing Products (IWAY).

• The IWAY code of practice expects suppliers to: follow national and international laws not use child labor not use woods and glues from non-sustainable forests reduce their waste and emissions contribute to recycling follow health and safety requirements care for the environment take care of their employees

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THE SECONDARY SECTOR


Primary Sector



or mineral

Secondary Sector



goods.

Tertiary Sector




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MANUFACTURING

• Manufacturers within the secondary sector create IKEA products from raw materials. As products move through the supply chain, the process of value-added takes place.

Input Manufacturing Process Added value+ =

• IKEA designs many of its products so that the smallest amount of resources can make the best products. For example, IKEA saves on resources by using hollow legs in furniture (e.g. the OGLA dining chair). Another example is by using a honeycomb-paper filling material instead of solid wood for the inside of table tops (e.g. the LACK series).

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SUSTAINABLE PARTNERSHIPS

• In 2000 IKEA formed a partnership with UNICEF to work on a community program in Northern India. The aim of the work was to prevent child labor by raising awareness and addressing the root causes.

• IKEA has also formed a partnership with the World Wildlife Fund (WWF). IKEA and WWF have committed themselves to promoting the sustainable use of natural resources. This helps to ensure that forests can be used both now and in the future.

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THE TERTIARY SECTOR


Primary Sector



or mineral

Secondary Sector



goods.

Tertiary Sector




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OTHER BUSINESS

• Businesses in the tertiary sector provide a service, such as banking, transportation or retailing. They do not extract the raw materials or make products themselves. 11% of businesses within the UK are retailers.

• In the tertiary sector, IKEA's retail stores add value to manufactured goods by providing a form of shopping different to the usual high-street experience. IKEA has more than 260 stores in over 36 countries. These meet the needs of consumers in a number of different ways:

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RETAILING

Retailing turnover in the UK was more than £250 billion in 2006. • Each IKEA store is large and holds more than 9,500 products giving lots of

choice.• Within each store, there are a number of realistic room settings that enable

customers to see what the products would look like in their own homes.• The IKEA store is built on a concept of 'you do half, we do half; together we save

money'. This refers to, for example, the customer assembling furniture at home.• Customers handpick products themselves using trolleys.• IKEA provides catalogues and home delivery to save customers” time.• IKEA stores have restaurants that provide Swedish dishes alongside local food

choices.

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SUSTAINABLE ACTIVITIES

To make its activities more sustainable, IKEA has set up many local UK initiatives:• In 2006 IKEA UK recycled more than 70% of its waste products. Its goal is

to recycle 90% of materials.• To reduce environmental impact, in 2006 IKEA UK started to charge for

carrier bags. This reduced the use of carrier bags by 95%. In June 2007 IKEA UK removed carrier bags from its stores completely.

• In December 2006 IKEA UK gave a brand-new folding bike to each of its 9,000 employees. It also gave subsidise travel tickets to encourage them to travel to and from work on public transport.

• IKEA UK has provided low-energy light bulbs to its entire UK workforce and switched its fleet of company cars to low-emission hybrid models.

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CONCLUSION

• IKEA's long-term ambition is to become the leading home furnishing company. However, for IKEA, getting there is not simply about developing profitability and market share.

• As a global organisation IKEA has chosen to undertake a leadership role in creating a sustainable way of working. It has educated suppliers to understand how and why sustainable production is vital. This has helped IKEA differentiate itself from its competitors.

All Reference:

http://businesscasestudies.co.uk/ikea/building-a-sustainable-supply-chain/introduction.html#axzz3r9DpOBXv

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END OF PRESENTATIONTHANK YOU